Scottish independence: Pound deal ‘very unlikely’

Danny Alexander said that the only way for Scots to keep the pound is to vote to stay in the UK. Picture: Robert Perry

IT IS highly unlikely that an independent Scotland could secure a deal with the rest of the UK that would allow it to retain the pound, according to the Chief Secretary to the Treasury Danny Alexander.

If Scotland leaves the UK, a currency union between the two countries would “present very real problems”, Mr Alexander said during a speech in London.

The UK Government minister also said that such an arrangement “may not be in the interests” of either an independent Scotland or the rest of the UK.

“It is highly unlikely that a currency union could be made to work,” the senior Liberal Democrat said.

“And it is therefore highly unlikely that a currency union would be agreed.”

Mr Alexander’s comments comes three weeks before the Scottish Government is due to publish its white paper on independence, detailing its case for leaving the UK.

‘Sterling zone’

The Scottish Government has already set out plans to retain the pound if people vote for Scottish independence in next year’s referendum, creating a “sterling zone” with the rest of the UK.

Economics experts in the Fiscal Commission Working Group, set up by First Minister Alex Salmond, have backed this, saying that keeping sterling as the currency in an independent Scotland is “sensible” and an attractive choice for the rest of the UK.

While Mr Salmond argues that this is “in the interest of Scotland and the rest of the United Kingdom”, Chancellor George Osborne has stated that it is unlikely the rest of the UK will agree to a currency union if Scotland became independent.

‘No going back’

Mr Alexander said that it is “absolutely clear” that the only way for Scotland to keep the pound as it is now is to vote No in the referendum.

“If Scotland leaves the UK, there will be no going back,” he told an event at London’s Caledonian Club organised by the Institute of Chartered Accountants of Scotland.

On a currency union, he said: “Any wishful thinking from the Scottish Government in its forthcoming White Paper will be just that, wishful thinking at best.”

It would be “very foolish for anyone to vote for an independent Scotland, on the basis that they will get to keep the pound”, because the “truth is that a currency union may not be in the interests of either the continuing UK or of Scotland”.

‘Brutal readjustments’

The experience of the eurozone shows that although currency unions can “appear successful” during periods of economic growth, they could result in “brutal readjustments in times of economic stress and uncertainty”, Mr Alexander said.

Although the economy is “getting stronger”, he said: “No one should assume that a strengthening UK economy increases the likelihood of a currency union between an independent Scotland and the continuing UK. It doesn’t because the fundamental problems remain.”

He also warned an independent Scotland against keeping the pound without formal currency union because “very few examples” exist where this is successful.

“Adopting another currency like this would be a mortal threat to Scotland’s financial services sector,” Mr Alexander claimed.

‘No camp look silly’

The SNP’s Kenneth Gibson, convener of Holyrood’s Finance Committee, said: “Every time people in the No campaign talk about this issue they look very silly, because it was Alistair Darling himself - the chair of the No campaign - who said in a broadcast interview earlier this year that a sterling area between an independent Scotland and the rest of the UK is ‘desirable’ and ‘logical’, which is indeed the case.

“If the No campaign leaders can’t keep their story straight, no wonder they are losing the plot.”

• The Scotsman Conferences is hosting a series of events capturing the many facets of the Scottish independence debate. 3 December sees a formidable line up of expert speakers tackle “The Independence White Paper: A Business Plan for Scotland?” For more details on this and other great events please visit www.scotsmanconferences.com